Nvida to License Out Graphics Technology

Published June 18, 2013

Reuters

Nvidia Chief Executive Jen-Hsun Huang said he will license graphics technology to other companies, a new model for the chipmaker that could lead to new business with Apple, Samsung and other mobile device makers.

Huang told the Reuters Global Technology Summit in San Francisco on Tuesday that licensing graphics cores and visual patents would help Nvidia take more advantage of the booming market for smartphones and tablets and tap markets it could not reach through selling its own chips.

"The bottom line is the world has changed and we're expanding our business model to serve markets that we historically could not serve," Huang said.

With its core PC market struggling, Nvidia in recent years has established itself in the fast-growing mobile market, creating processors for tablets that take advantage of its graphics expertise.

But Nvidia has faced tough competition from the much larger Qualcomm, limiting its success. Apple designs its own processors for the iPhone and iPad, and top Android smartphone maker Samsung Electronics increasingly uses its own processors in its devices.

Licensing its graphics technology to those or other companies could help Nvidia, with a market capitalization of about $8 billion, reach further into the mobile industry than it has been able to do on its own.

"We grew up in the PC era. ... The easiest way to monetize our technology was to sell chips. As we think beyond PCs and cloud and mobile, new business models have to emerge. We have to be thoughtful and flexible," Huang said.

The move will put Nvidia into direct competition with UK-based Imagination Technologies, whose graphics technology is used in Apple's iPhone, Samsung's Galaxy S4 smartphone and other devices. Apple and top chipmaker Intel own stakes in Imagination.

Nvidia will also be competing against UK-based ARM Holdings, which licenses processor technology to chipmakers including Nvidia and is increasingly targeting graphics as well.

Qualcomm uses its own graphics technology on its mobile processors.

"This is a maturation in their mobility play," Pat Moorhead, an analyst at Moor Insights and Strategy, said of Nvidia's licensing plans.

"It widens the aperture for them because now they can look at Samsung and Apple, and HTC, and basically everyone who doesn't use Qualcomm."

Top chipmaker Intel has been slow to modify its powerful PC chips for low-power smartphones and tablets, but its newest crop of mobile chips is expected by many analysts to show major improvements and lead to even more competition in the already crowded mobile chip market.

Nvidia plans to start by licensing its Kepler architecture that it uses to make high-end graphics chips for PCs.

Global PC sales plunged 14 percent in the first three months of the year, the biggest decline in two decades of record-keeping, as tablets continue to gain in popularity and buyers appear to be avoiding Microsoft Corp's new Windows 8 operating system, according to IDC.

In a major break from its traditional business of designing chips, Nvidia later this month plans to begin shipping a hand-held game device using its Tegra 4 processors, a bid to use its appeal with PC game enthusiasts to challenge console makers like Sony Corp and Microsoft.

Also underscoring the urgency of finding new markets for its chips, Nvidia this year has shown off new graphics-intense server products for games and offices, also made with its processors.

Nvidia is integrating Long Term Evolution (LTE) features on upcoming versions of its Tegra chips, making them compatible with high-end carrier networks. Its lack of LTE technology has kept Nvidia out of the high-end smartphone market, dominated by Qualcomm.